Question: You have a project valued at 2 0 0 that could increase or decrease by 2 5 % per period for two periodsThe project has

You have a project valued at 200 that could increase or decrease by 25% per period for two periodsThe project has three embedded options:

1. option to abandon at 190;

2. a contraction option with a strike of 50 with an 80% of original value; and

3. an expansion option with a strike of 70 with 130% of original value.

The risk-free rate is 5% and the WACC is 10 .

What is the value of all the options combined?

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